IEA Notes OPEC Production Cut with Concern, Expects its Market Impact will be "Moderate"
(Paris) — 17 January 2001
The International Energy Agency noted "with concern" OPEC’s decision to cut crude oil production by 1.5 million barrels per day. "Such unilateral efforts to set oil market prices simply aggravate volatility," said Robert Priddle, the IEA Executive Director.
Priddle said the OPEC decision had been widely expected and appears to have been factored into oil prices. Priddle pointed out that the "OPEC Ten" countries have been slightly underproducing their previous target figure of 26.7 mb/day, while Iraqi exports, which have been low, are expected to rise. Another moderating element, according to Priddle, was that "the heating-oil season is well advanced." Recent high prices have been partly attributed to a lack of heating oil inventories, especially in the Northeast United States. "By the time any action decided today can have an effect," Priddle said, "we’ll be into the springtime, and the accent will be on gasoline for the transport sector."
Stepping back from today’s decision, Mr. Priddle emphasised that many factors could change between now and March 16, the date of OPEC’s next scheduled meeting. "There will be a chance over the next two months for consumers to make their feelings known to the producers, and vice versa." One of the IEA’s continuing concerns, Priddle said, was that of oil stock levels. "Stocks are still low," he said. Historically, consumer countries have been able to replenish diminished stocks in the second quarter of the calendar year. "Today’s cut will make it that much harder to rebuild stocks," Priddle said, "and low stocks contribute to market volatility, which is in the interest of neither producers nor consumers."
The Paris-based IEA, founded in 1974, represents 25 major oil-consuming countries. Its core mission is to work for a secure supply of affordable energy worldwide. In the event of a serious supply disruption, the Agency is responsible for coordinating the responses of its Member countries.